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AmpalAmerican Israel Corp. Reports Operating Results (10-Q)

May 05, 2010 | About:
10qk

10qk

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AmpalAmerican Israel Corp. (AMPL) filed Quarterly Report for the period ended 2010-03-31.

Ampalamerican Israel Corp. has a market cap of $120.7 million; its shares were traded at around $2.15 with and P/S ratio of 0.3. AMPL is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

In the three months ended March 31, 2010, the Company recorded $10.8 million of marketing and sales expense, as compared to a $1.6 million marketing and sales expense in the corresponding period in 2009. These expenses are attributable to Gadot and 012 Smile and composed mainly of salary and commission expenses. The increase is primarily the result of the marketing and sales expense of 012 Smile which the Company included for the first time in 2010, amounting to $8.6 million.

In the three months ended March 31, 2010, the Company recorded $168.2 million in revenue which was comprised of $114.4 million in the Chemicals segment, $52.1 million in the Communications segment, $1.0 million in the Finance segment and $0.7 million in the Leisure-time segment, as compared to $125.2 million for the same period in 2009, which was comprised of $94.7 million in the Chemicals segment, $29.9 million in the Finance segment and $0.7 million in the Leisure-time segment. The increase in Chemicals revenues is primarily attributable to the recovery in the markets, especially in Europe, which lead the increase in sold quantities and product prices. The effect of increased demand for chemical carrier ships was still felt during the first three months of 2010. The freight rates are still low compared to 2008. In addition, the decline in shipped quantities generates an uneven shipment of chemicals, which in certain voyages, results in almost no cargo being shipped on the return leg of a voyage.

In the three months ended March 31, 2010, the Company recorded $178.7 million in expenses which was comprised of $116.2 million of expenses in the Chemicals segment, $50.2 million in the Communications segment, $11.8 million of expenses in the Finance segment and a $0.6 million of expenses in the Leisure-time segment, as compared to $103.3 million in expenses for the same period in 2009 which was comprised of $94.9 million in the Chemicals segment, $7.8 million in the Finance segment and $0.5 million in the Leisure-time segment. The chemical commodity pricing is a derivative of the crude oil pricing. Since September 2009 the crude oil's price increase and led to an increase in the Chemical commodity prices.

On April 29, 2008, Ampal completed a public offering in Israel of NIS 577.8 million (approximately $166.8 million) aggregate principal amount of its Series B debentures, due in 2016. The debentures are linked to the Israeli consumer price index and carry an annual interest rate of 6.6%. The debentures rank pari passu with Ampal s unsecured indebtedness. The debentures will be repaid in five equal annual installments commencing on January 31, 2012, and the interest will be paid semi-annually. As of March 31, 2010, the outstanding debt under the debentures amounts to $144.1 million, due to the change in valuation of the New Israeli Shekel as compared to the U.S. dollar and to the repurchase plan. Ampal deposited an amount equal to $44.6 million with Clal Finance Trusties 2007 Ltd. in accordance with a trust agreement dated April 6, 2008, to secure the first four years worth of payments of interest on the debentures. As of March 31, 2010, the outstanding amount of the deposit was $20.5 million. The debt offering was made solely to certain non-U.S. institutional investors in accordance with Regulation S under the U.S. Securities Act of 1933, as amended. The notes have not been and will not be registered under the U.S. securities laws, or any state securities laws, and may not be offered or sold in the United States or to United States persons without registration unless an exemption from such registration is available. Midroog Ltd. (an affiliate of Moody's Investors Service) currently rates Ampal's Series A and Series B Debentures as A3.

Ampal funded the Gadot acquisition with a combination of available cash and the proceeds of the credit facility, dated November 29, 2007 (the "Credit Facility"), between Merhav Ampal Energy Ltd. ("MAE") and IDB, for approximately $60.7 million, which amount was increased, on the same terms and conditions, on June 3, 2008 by approximately $11.3 million in order to fund the second stage of the transaction and on September 23, 2008 by approximately $15.4 million in order to fund the third stage of the transaction. The Credit Facility is divided into two equal loans of approximately $43.7 million. The first loan is a revolving loan that has no principal payments and may be repaid in full or in part on December 31 of each year until 2019, when a single balloon payment will become due. The second loan also matures in 2019, has no principal payments for the first one and a half years, and shall thereafter be paid in equal installments over the remaining 9.5 years of the term. Interest on both loans accrues at a floating rate equal to LIBOR plus 2% and is payable on a current basis. Ampal has guaranteed all the obligations of MAE under the Credit Facility and Ampal s interest in Gadot has also been pledged to IDB as a security for the Credit Facility. Yosef Maiman has agreed with IDB to maintain ownership of a certain amount of the Company s Class A Common Stock. The Credit Facility contains customary affirmative and negative covenants for credit facilities of this type.

The loan under the 012 Credit Facility, dated January 31, 2010 (the "012 Credit Facility"), between 012 Smile, Bank Leumi Le' Israel B.M ("Leumi") and IDB (together with Leumi, the "Bank Lenders"), was funded 80% by Leumi and 20% by IDB. Leumi was appointed arranger on behalf of the Bank Lenders. The 012 Credit Facility, denominated in NIS, is divided into three tranches as follows: 500 million NIS (or approximately $134 Million), 200 million NIS (or approximately $54 Million) and 100 million NIS (or approximately $27 Million), respectively, which are subject to the following terms:

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